Greenhouse Gas Control Policies in Australia
Overall GHG emission target and timing:
Under the Kyoto Protocol, Australia accepted a target to limit its net GHG emission increase to 8% above 1990 levels. It has also proposed that, under a new international agreement, it would take on a target to reduce its GHG emissions by 25% below 2000 levels by 2020 if “the world agrees to an ambitious global deal to stabilise levels of CO2 equivalent in the atmosphere at 450 parts per million (ppm) or lower.”
Principal Policy Instruments
The Australian government proposed a Carbon Pollution Reduction Scheme (CPRS) to be phased in beginning July 1, 2011. A one-year period would occur from 2011-12, during which carbon emission permits would be sold at a fixed price Aus$10 per ton of carbon (US$9.20); these may not be banked for use in later periods. The full cap-and-trade system would be in effect by 2012, by which time all covered businesses must purchase carbon permits at market prices. The Senate did not pass this proposal on its first reading in August 2009; the proposal was reintroduced on October 22 for consideration in the week of November 16 in Australia’s Senate, although Climate Change Minister Penny Wong has suggested that passage may be difficult in 2009.
The Australian program also includes a Renewable Energy Target, and investment in carbon capture and storage. Up to 5 percentage points of its offered 25% target for 2020 could be met by purchase of international emission reduction credits using CPRS revenue, though no earlier than 2015. Eligible businesses also may receive government funding for energy efficiency investments, available from a Aus$200 million (US$184 million) portion of a Climate Change Action Fund.
While the Australian Senate did not pass the carbon reduction proposal in August, it passed a Renewable Energy Target (RET) into law that establishes a system of tradable Renewable Energy Certificates (RECs). It requires that 20% of electricity come from renewable resources by 2020 (projected to require 45 gigawatt hours (GWh)). Currently, about 8% of Australia’s electricity is generated with renewables. Among other provisions, the law provides Solar Credits, allowing receipt of a multiple of 2-5 of RECs for qualified installations, that will subsidize the capital costs of small-scale systems, such as household photovoltaic systems. The grants of RECs will depend on the generation of energy, not the installed capacity (which, in some countries, has not stimulated maximizing the use of installed capacity).
Covered Gases and Sectors
As proposed, the CPRS would initially cover the six GHG of the Kyoto Protocol, and emissions from stationary energy, transport, industrial processes, waste, forestry, and fugitive emissions from oil and gas production. It is expected to cover 75% of Australia’s GHG emissions and about 1000 entities (out of 7.6 million registered businesses in Australia). Agriculture eventually may be included.
Allocation of GHG reductions to various sectors
Permits would be available in 2011 at a fixed price of Aus$10 per ton of carbon-equivalent (US$8.60), after which all covered sources must purchase their permits through auction or the market.
Regulations and exemptions specific to trade-sensitive sectors
The proposed CPRS includes provisions to assist emissions-intensive, trade-exposed industries (EITE). Eligibility for assistance would be determined by an assessment of all entities conducting a specific activity. First, there would be quantitative and qualitative tests to assess the activity’s trade exposure. Second, there would be assessments of greenhouse gas intensity based on the average emissions per million dollars of revenue or emissions per million dollars of value added. The baseline for the emission data would be 2006-07 to 2007-08, while the baseline for revenue/value added data would be 2004-05 to the first half of 2008-09.
The government allocates free permits using an allocation baseline of emissions per unit of output for each EITE activity. This baseline will provide the basis for eligibility at either the 90% or 60% assistance rates. The proposal would set up two initial rates of assistance: (1) 90% allocation of allowances for activity with emissions intensity of at least 2,000 tons of emissions per million dollars revenue or 6,000 tons of emissions per million dollars of value added; (2) 60% allocation of allowances for activity with emissions intensity between 1,000 tons of emissions per million dollars revenue and 1,999 tons of emissions per million dollars revenue or between 3,000 tons and 5,999 tons of emissions per million dollars of value-added. This assistance per unit of production will be reduced by 1.3% annually.
The proposed CPRS would include a five-year Global Recession Buffer as part of an assistance package to EITE. Industries eligible for 60% assistance would receive a “buffer” of 10% free emission permits; industries eligible for 90% assistance would receive a 5% buffer of free emission permits.
Reviews of the EITE scheme would occur every five years, and would consider a list of identified issues, including whether the assisted firms are making progress toward world’s best practice efficiencies, and whether “broadly comparable carbon constraints” are imposed in competing economies. Any changes to the system would require five years’ advance notice. The scope of consideration for assistance includes (1) direct emissions covered, (2) related cost increases for electricity and steam use, and (3) related cost increases for upstream emissions from natural gas and its components (e.g., methane and ethane) used as feedstock. The assistance package would include direct emissions and some indirect emissions.
Two amendment bills to the Renewable Energy (Electricity) Act 2000 were passed on August 20, 2009 and received Royal Assent on September 8, 2009. The Renewable Energy Amendments contain provisions to assist electricity-intensive industries and the coal industry. Under these provisions, one or more emissions-intensive trade-exposed activities may be partially exempted from its REC requirements. If resulting Partial Exemption Certificates are taken into account, it would reduce the charge for falling short of RECs that would otherwise be payable. In this law, the definition of “emissions-intensive trade-exposed activity” would be either defined by further regulations, or by regulations under a Carbon Pollution Reduction Scheme Act 2009 if passed. The methods for calculating the amounts of partial exemptions would be defined by regulations.
- ^ This section was prepared by Jane A. Leggett, Specialist in Environmental and Energy Policy
- ^ http://www.environment.gov.au/minister/wong/2009/mr20090504.html.
- ^ Live market currency exchange rate for November 19, 2009 is listed as 1Aus$ equivalent to 0.92 US$ (http://www.xe.com/). Currency rates are subject to fluctuation.
- ^ http://www.bloomberg.com/apps/news?pid=20601081&sid=aJXyEr9Kr_P4. As of November 18, 2009, the Australian Senate had just begun debate on the Labor Party’s CPRS bill with the hope of passage before the year end break beginning November 25, 2009.
- ^ Renewable Energy (Electricity) Amendment Act 2009, No. 78, 2009, C2009A00078; and Renewable Energy (Electricity) (Charge) Amendment Act 2009, No. 79, 2009, C2009A00079. http://www.comlaw.gov.au/comlaw/ Legislation/Act1.nsf/0/94CB90B9EED48B69CA25762D001B6F5F?OpenDocument.
- ^ Australian Government, Carbon Pollution Reduction Scheme: Australia’s Low Pollution Future: White Paper (December 2008).
- ^ http://www.climatechange.gov.au/whitepaper/summary/index.html.
- ^ http://www.environment.gov.au/minister/wong/2009/mr20090504a.html.
- ^ Renewable Energy (Electricity) Amendment Act 2009, Schedule 2.
Note: The first version of this article was drawn from R40936 An Overview of Greenhouse Gas (GHG) Control Policies in Various Countries by Jane A. Leggett, Richard K. Lattanzio, Carl Ek, and Larry Parker, Congressional Research Service, November 30, 2009.
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